Ethiopian Airlines flies alone, taking all the cash

Saturday September 9 2017

In Summary

The success of the pirates, the smugglers on Lake Victoria, and the trading boats on River Congo is great news, because it proves that we can manage watercrafts and trade extremely well. The fellows who dabble in arms smuggling in places like the DR Congo, have also been quite adept at getting value out of their rickety planes.

Every other week, you get a story that, while perhaps not intending to, raises very troubling questions.

The EastAfrican and other media last week served up one; that Ethiopian Airlines nearly doubled its profit for 2016. The airline reported a 10 per cent increase in revenue to $2.4 billion for 2015/16, with profits of $261.9 million, up from $150.9 million.

So far so good. The EastAfrican, for one, then twisted the knife in, noting that Ethiopian was Africa’s “only profitable airline.”

With several states on the continent, especially the oil-producing ones, hammered by the low prices of the past two years and the foreign exchange crisis hitting others, the airline’s CEO Tewolde Gebremariam lamented that it has “more than $220 million” of its funds stuck in several African countries.

If my memory serves me well, that is not too far off from what member countries owed in arrears to the African Union early this year.

With once-profitable Kenya Airways going down the chute in recent years, and South African Airways failing to climb out of its perennial financial hole, Ethiopian’s achievements continues to be something to write home about.

It raises the question of why African states and companies find it so hard, indeed nearly impossible, to run airlines profitably. Some sceptics believe that Ethiopian Airlines receive subsidies, thus explaining its success.

That however only complicates the matter. Since all national airlines receive subsidies, why aren’t they successful? South Africa in particular has pumped billions of dollars into SAA over the years, but it won’t turn.

Along with things that fly, official Africa has also struggled to run things that travel over water. Two decades ago there was still the occasional ship sailing between Uganda and Tanzania over Lake Victoria.

Apart from smugglers, who are more efficient than governments it seems, the last time boats sailed between Kenya and Tanzania, were Yoweri Museveni’s rebels travelling at dawn and dusk into Uganda in the early 1980s.

However, Ethiopia, which is landlocked, has a shipping line, although it has been trying to sell a majority stake in it to a private investor. Kenya, and nearly all the coastal nations in Africa, doesn’t own a shipping line.

The most enterprising seafarers on Africa’s East coast are the Somali pirates. It took the combined navies of over 20 countries, some global powers, to defeat the Somali pirates.

It was a good thing but, still, the success of the pirates, the smugglers on Lake Victoria, and the trading boats on River Congo is great news, because it proves that we can manage watercrafts and trade extremely well. The fellows who dabble in arms smuggling in places like the DR Congo, have also been quite adept at getting value out of their rickety planes.

Corruption, political stupidity (i.e. holding up a state airline to wait for a late minister, or cancelling flights because the president’s wife has taken the plane for a shopping trip to Paris), incompetence, petty protectionism, closed borders, visa regimes that punish other Africans, have all been blamed.

But it’s time to look for new explanations. Ethiopian doesn’t hold up flights for politicians, but the country suffers from most of those ills, but it still runs a successful state airline. Anyone?